Thursday, December 16, 2010

Technical Picture - Distribution

As noted in my last post, the posture for the S&P was too bullish. Yesterday's distribution came as no surprise. The DOW, however made a higher high yesterday morning. This was unconfirmed by the SPY and Nasdaq, hence the reversal and afternoon sell-off.

As we can see from the SPY 60 minute chart above, we have carved out a bull flag as prices have pulled back to former resistance, which for the time being, is holding as support. As long as the RSI holds 40 as support, it's all good. Failure, would change the short-term trend on this timeframe, from bullish to bearish.

As I mentioned in the last post, despite the retracement, the $USD was still in an uptrend. We said if the $USD could maintain support at RSI 40-50, we were in good shape. As you can see from the chart above, we were right. $USD strength does hamper the equity rally as it weighs on commodities.

AMRN - I posted this chart on Chart.ly over the weekend, with a BO price of $6.00. Yesterday it broke out. However, the weak market made it very choppy and hard to manage. I did lock in $0.50 on half and moved stop to BE.

OPEX is not my favorite because of the pinning which usually starts on Thursday and ends of Friday. Often this can result in slow, choppy price action.

For the FOMC I have a system. Wait for the first impulse move, then the retracement. When the retracement forms a base, trade in the direction of the initial impulse move. On Wed. it was lower. I shorted the NQ futures and it worked perfectly.

Holiday weeks usually have lower volume, but it doesn't seem to be a problem.